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Technology sharing and tacit collusion

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  • Levy, Nadav

Abstract

I study the prospects for collusion between rival firms that share technological know-how. Two common forms of technology sharing are compared: a research joint venture (RJV) and licensing. Under licensing, firms can use the licensing fee to elicit higher levels of R&D than with an RJV. However, firms must also be induced to license innovations ex post. For a broad set of cases, licensing yields higher collusive profits to firms and higher prices to consumers. In other cases, licensing can only be induced through a very high license fee, leading to excessive R&D and lower profits. In these cases, the colluding firms prefer to share technology through an RJV.

Suggested Citation

  • Levy, Nadav, 2012. "Technology sharing and tacit collusion," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 204-216.
  • Handle: RePEc:eee:indorg:v:30:y:2012:i:2:p:204-216 DOI: 10.1016/j.ijindorg.2011.09.002
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    References listed on IDEAS

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    1. Baumol, William J, 1992. "Horizontal Collusion and Innovation," Economic Journal, Royal Economic Society, vol. 102(410), pages 129-137, January.
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    5. Kaz Miyagiwa, 2009. "COLLUSION AND RESEARCH JOINT VENTURES -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 57(4), pages 768-784, December.
    6. Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, vol. 76(3), pages 390-407, June.
    7. Lin, Ping, 1996. "Fixed-Fee Licensing of Innovations and Collusion," Journal of Industrial Economics, Wiley Blackwell, vol. 44(4), pages 443-449, December.
    8. Brodley, Joseph F, 1990. "Antitrust Law and Innovation Cooperation," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 97-112, Summer.
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    Cited by:

    1. Luis Aguiar & Philippe Gagnepain, 2017. "European cooperative R&D and firm performance: Evidence based on funding differences in key actions," Post-Print halshs-01630665, HAL.
    2. repec:eee:indorg:v:53:y:2017:i:c:p:1-31 is not listed on IDEAS

    More about this item

    Keywords

    Collusion; Technology sharing; Research joint ventures; Licensing;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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